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The REIT wrapper: Standard & Poor

by Beth Campbell

With the proliferation in specialty real estate investment trusts, Standard & Poor’s continues to consider how to evaluate REITs as the definition of “real estate” expands beyond the boundaries of our REIT criteria. The current criteria focus on companies that own and operate real estate in traditional property sectors.

We are likely to evaluate many of the nontraditional specialty REITs that have recently converted to REITs or are under consideration for REIT formation as operating businesses that are now adopting the REIT structure for financing purposes. In these cases, we would not rate the newly formed REIT applying S&P’s real estate company criteria. Instead, the analytical team with the most appropriate industry sector expertise would assess the entity, and S&P’s general corporate industrials rating criteria would apply.